February 21, 2008

NCUA Issues a Legal Opinion Letter on Member Business Lending; Spring is in the Air

On Tuesday, NCUA issued a Legal Opinion Letter 08-0128 (February 8, 2008). The letter clarifies that credit unions do not always need to use the services of a third party to satisfy the NCUA member business lending rule requirement that has two years direct experience in the type of lending that a credit union does. You may access it here.

The letter also drives home another point. The direct experience must make sense for what the credit union is doing. In their words:

Individuals who meet the requirements of this section must have lending experience directly related to the type of MBLs the credit union intends to offer. These individuals must be familiar with the proper underwriting, analysis, and origination of loans of a particular type in order to understand their complexity and risk exposure. For example, an individual with experience solely in taxi cab loans does not have the requisite experience necessary to underwrite a loan to the taxi company for a gas station, because the individual will be unfamiliar with related issues that may impact the loan, such as environmental laws applicable to underground storage tanks. Likewise, an individual who only has experience with financing residential real estate for homebuilders does not have sufficient lending experience for the land development and construction, or purchase, of a commercial strip center. 68 Fed. Reg. 56537, 5654.

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Ah, the crack of the bat. The sound of a ball popping into a catcher's mitt. And the Compliance Guy just found out where his seats are for the Nationals this year. That takes the chill out of today's 40-degree temperature.

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